RI's positive outlook fragile: Consultant

The Jakarta Post, Jakarta

While economic indicators here in the past few weeks have shown encouraging signs, a senior consultant warned that unless the government can consistently show a sustained effort in economic restructuring, the positive outlook would be nothing more than temporary.

Political risk consultant James Van Zorge said that while foreign investors have been encouraged by the latest developments, it remains unlikely that they will consider increasing their exposure in Indonesia.

Even if the positive momentum is sustained, Van Zorge does not believe a significant rise in investment till 2003.

"Investment is riven by two factors: sentiment and fundamentals. Right now the sentiment has improved, but not the fundamentals," the senior partner at Van Zorge, Heffernan an Associates said.

In his view under such a situation portfolio investors in currency and equity markets are likely to be the prime movers, but foreign direct investors will hold back.

"When the government sends the right positive signals in areas such as debt management, macroeconomic policy, business policy, legal reform, and governance...foreign investors will (then) start to look for and invest in new business opportunities," he said.

Speaking to reporters here on Tuesday to announce the agenda of the Indonesia Next executive conference, Van Zorge underlined the importance of maintaining the current momentum.

"If the government can maintain its momentum, then by early next year we might see the first signs of any substantial increase in applications for foreign direct foreign investment."

The Indonesia Next which will be held here on May 22-23. According to Van Zorge some 40 national and international speakers will address the meeting.

These include Coordinating Minister for Political and Security Affairs Susilo Bambang Yudhoyono, the World Bank's Indonesia country director Mark Baird and Adam Schwarz of McKinsey & Co.